NZ Level 6 (NZC) Level 1 (NCEA) Comparing Loans

## Interactive practice questions

The table presents the details of three types of home loans.

Loan Interest Rate (p.a.) Legal Fees Application Fee Service Fee (p.a.)
A: Fixed for 5 years, then variable $5.99%$5.99% $\$160$$160 \550$$550 $\$20$$20 B: Variable 5.74%5.74% \100$$100 $\$375$$375 \25$$25
C: Fixed $6.03%$6.03% $\$160$$160 \775$$775 $\$1515
a

Which loan option currently has the lowest annual interest rate?

A

A

B

B

C

C

A

A

B

B

C

C
b

Calculate the total fees that loan A will incur in the first year.

c

If Loan C is taken out on a $30$30 year term, calculate the total fees incurred over the term of the loan.

d

The table shows the expected change in the variable rate for the next 4 years.

Year Rate change
1 +$0.3%$0.3%
2 -$0.18%$0.18%
3 -$0.04%$0.04%
4 +$0.32%$0.32%

In 4 years, by what percentage will the variable rate of Loan B exceed the fixed rate of Loan C?

e

Home loan rates are expected to fluctuate significantly for the next decade, and as the rate changes, loan repayments change accordingly. If Maria wants to know her exact repayments over the 7 year term of her loan, which should she choose?

A

A

B

B

C

C

A

A

B

B

C

C
Easy
Approx 7 minutes

Comparison rates allow for potential loan recipients to quickly compare different loans, accounting for interest rates, fees and other charges.

The following table presents information on interest rates and fees for a fixed and variable interest rate loan offered by a bank.

Here, the interest is compounded annually, the establishment fee is paid once at the commencement of the loan, the service fee is paid per month, and the guarantee fee is paid annually.

Consider the following fixed interest loans:

### Outcomes

#### NA6-3

Apply everyday compounding rates

#### 91026

Apply numeric reasoning in solving problems